NSPCC in £63m deal to insure pension risks

One of Britain’s best-known children’s charities has struck a £63m deal to
insure the risks on its pension scheme and prevent donations being diverted
to retired workers.

NSPCC's latest accounts to March 31 2012 show that, on an accounting basis, the organisation still had a £5.5m pension deficit, with its £160.7m of liabilities outweighing the £155.2m assets.Photo: ALAMY

The National Society for the Prevention of Cruelty to Children, which runs the ChildLine 24-hour phone service founded by Esther Rantzen, is insuring a chunk of its pensioner liabilities with specialist provider Pension Insurance Corporation.

Under the deal, the NSPCC will transfer £63m of assets to Pension Corp, which will then assume key risks in the retirement scheme, including for inflation and longevity. The deal excludes deflation risk.

Pensions have become a major headache for Britain’s charities, with liabilities escalating thanks to the combined effects of rock-bottom interest rates, lower than expected investment returns and longer lifespans. Exacerbated by the effects of quantitative easing, the collective pension deficits for Britain’s charities has been estimated at more than £1bn, with organisations forced to siphon off money from donations to address their shortfalls.

The NSPCC closed its final-salary pension scheme, with about 1,000 members, in 2009.

But its latest accounts to March 31 2012 show that, on an accounting basis, the organisation still had a £5.5m pension deficit, with its £160.7m of liabilities outweighing the £155.2m assets.

After the most recent triennial actuarial review in March 2009 showed a £17.1m deficit, the NSPCC committed to pumping in £2m a year to tackle the shortfall.

Paul Taylor, the charity’s finance director, said: “The steps we have been taking on pensions, including closing the final salary scheme and this deal, are all about taking the risk away from the society. This allows us to concentrate our income on protecting children from abuse, which is our main goal.”

The NSPCC, which was founded in 1884 and has the Queen as its patron, saw an 8.7pc fall to £136m in total incoming funds in its most recent year, with regular donations down slightly to £70.4m. The charity, which is chaired by Mark Wood, the former UK chief executive of the Prudential, committed 78.1pc of its total expenditure to its work with children, answering more than 1.2m calls on ChildLine.

David Collinson, Pension Corp’s co-head of business origination, said the deal enabled the NSPCC to insure pensioner benefits by “removing the biggest risks, such as longevity, inflation and investment”.

The difficulties faced by charities were brought home earlier this year when Barnado’s became the latest to close its final salary scheme to all members, having run up an £83.9m pension deficit by March 2012. At the time, Barnado’s finance director, said: “We have a responsibility to be as prudent as possible in future-proofing our finances”.

Pension Corp has provided similar insurance arrangements for other charities, striking a deal in March with the Institute of Cancer Research to cover £30m of its pension liabilities.